Reitmans (Canada) Limited announces its results for the three and nine months ended October 29, 2016

MONTREAL, Dec. 1, 2016 /CNW Telbec/ -

Three months ended October 29, 2016

Sales for the three months ended October 29, 2016 were $245.6 million as compared with $240.3 million for the three months ended October 31, 2015, an increase of 2.2%, despite a net reduction of 81 stores as the Company reduced the number of stores to optimize performance in select markets.  Same store sales¹ increased 7.1% with stores increasing 4.7% and e-commerce increasing 40.1% as the Company continues to experience strong growth in its e-commerce channel.

The Company's gross margin for the three months ended October 29, 2016 was 57.0% as compared to 57.4% for the three months ended October 31, 2015. Gross profit for the three months ended October 29, 2016 increased $1.9 million or 1.4% to $139.9 million as compared with $138.0 million for three months ended October 31, 2015 despite a negative foreign exchange impact of approximately $4.6 million.

Results from operating activities for the three months ended October 29, 2016 were $6.5 million as compared with $3.0 million for the three months ended October 31, 2015, an increase of $3.5 million.

Net earnings increased $7.9 million for the three months ended October 29, 2016 to $7.6 million ($0.12 basic and diluted earnings per share) as compared with a net loss of $0.3 million ($0.00 basic and diluted loss per share) for the three months ended October 31, 2015.

Adjusted EBITDA¹ for the three months ended October 29, 2016 was $18.4 million as compared with $15.3 million for the three months ended October 31, 2015, an increase of $3.1 million. The increase in adjusted EBITDA was primarily attributable to improvements in gross profit and reduced store operating costs.

Nine months ended October 29, 2016

Sales for the nine months ended October 29, 2016 were $703.5 million as compared with $695.0 million for the nine months ended October 31, 2015, an increase of 1.2%, despite a net reduction of 81 stores as the Company reduced the number of stores to optimize performance in select markets.  Same store sales¹ increased 7.5% with stores increasing 5.0% and e-commerce increasing 48.3% as the Company continues to experience strong growth in its e-commerce channel.

The Company's gross margin for the nine months ended October 29, 2016 decreased to 56.4% from 57.2% for the nine months ended October 31, 2015.  Gross profit for the nine months ended October 29, 2016 decreased $0.7 million or 0.2% to $396.6 million as compared with $397.3 million for the nine months ended October 31, 2015 including a negative foreign exchange impact of approximately $10.1 million.

Net earnings increased $18.8 million for the nine months ended October 29, 2016 to $10.6 million ($0.17 basic and diluted earnings per share) as compared with an $8.2 million loss ($0.13 basic and diluted loss per share) for the nine months ended October 31, 2015.

Adjusted EBITDA¹ for the nine months ended October 29, 2016 was $37.2 million as compared with $34.9 million for the nine months ended October 31, 2015, an increase of $2.3 million. The increase in adjusted EBITDA was primarily attributable to reduced store operating costs.

Dividends

At the Board of Directors meeting held on December 1, 2016, a quarterly cash dividend (constituting eligible dividends) of $0.05 per share on all outstanding Class A non-voting and Common shares of the Company was declared, payable January 26, 2017 to shareholders of record on January 16, 2017.

Sales for the four weeks ended November 26, 2016

Sales for the month of November (the four weeks ended November 26, 2016) increased 0.4% with same store sales¹ increasing 5.1%, stores increasing 1.4% and e-commerce increasing 47.0%. At November 26, 2016, the Company operated 694 stores as compared to 773 stores at November 28, 2015, a net reduction of 79 stores.

About Reitmans (Canada) Limited

The Company is a leading ladieswear specialty apparel retailer with retail outlets throughout Canada.  The Company operates 694 stores consisting of 302 Reitmans, 127 Penningtons, 98 Addition Elle, 84 RW & CO., 64 Thyme Maternity and 19 Hyba.

¹Non-GAAP Financial Measures

The Company has identified several key operating performance measures and non-GAAP financial measures which management believes are useful in assessing the performance of the Company; however, readers are cautioned that some of these measures may not have standardized meanings under IFRS and, therefore, may not be comparable to similar terms used by other companies.

In addition to discussing earnings in accordance with IFRS, this press announcement provides adjusted earnings before interest, taxes, depreciation and amortization ("adjusted EBITDA") as a non-GAAP financial measure.  Adjusted EBITDA is defined as net earnings before income tax expense, other income, dividend income, interest income, net change in fair value of marketable securities, interest expense, impairment of goodwill, depreciation, amortization and net impairment losses.  The following table reconciles the most comparable GAAP measure, net earnings or loss, to adjusted EBITDA.  Management believes that adjusted EBITDA is an important indicator of the Company's ability to generate liquidity through operating cash flow to fund working capital needs and fund capital expenditures and uses the metric for this purpose.  The exclusion of dividend, interest income and net change in fair value of marketable securities eliminates the impact on earnings derived from non-operational activities.  The exclusion of depreciation, amortization and impairment charges eliminates the non-cash impact.  The intent of adjusted EBITDA is to provide additional useful information to investors and analysts and the measure does not have any standardized meaning under IFRS.  Although depreciation, amortization and impairment charges are non-cash changes, the assets being depreciated and amortized will often have to be replaced in the future, adjusted EBITDA does not reflect any cash requirements for such replacements.  Adjusted EBITDA should not be considered as discretionary cash available to invest in the growth of the business and as a measure of cash that will be available to meet the Company's obligations.  Adjusted EBITDA should therefore not be considered in isolation or used in substitute for measures of performance prepared in accordance with IFRS.  Other companies may calculate adjusted EBITDA differently. From time to time, the Company may exclude additional items if it believes doing so would result in a more effective analysis of underlying operating performance. The exclusion of certain items does not imply that they are non-recurring.

The Company uses a key performance indicator ("KPI"), same store sales, to assess store performance (including each banner's e-commerce store) and sales growth.  Same store sales are defined as sales generated by stores that have been continuously open during both of the periods being compared and include e-commerce sales.  The same store sales metric compares the same calendar days for each period.  Although this KPI is expressed as a ratio, it is a non-GAAP financial measure that does not have a standardized meaning prescribed by IFRS and may not be comparable to similar measures used by other companies.  Management uses same store sales in evaluating the performance of stores and considers it useful in helping to determine what portion of new sales has come from sales growth and what portion can be attributed to the opening of new stores.  Same store sales is a measure widely used amongst retailers and is considered useful information for both investors and analysts.  Same store sales should therefore not be considered in isolation or used in substitute for measures of performance prepared in accordance with IFRS.

The following table reconciles net earnings (loss) to adjusted EBITDA for the three and nine months ended October 29, 2016 and October 31, 2015:

(in millions of Canadian dollars) (unaudited)	For the three months ended				For the nine months ended
	October 29, 2016		October 31, 2015		October 29, 2016		October 31, 2015
Net earnings (loss)	$	7.6	$	(0.3)	$	10.6	$	(8.2)
Depreciation, amortization and net impairment losses		11.2		11.6		32.3		35.7
Dividend income		(0.6)		(0.6)		(1.9)		(1.9)
Interest income		(0.2)		(0.1)		(0.5)		(0.4)
Net change in fair value of marketable securities		(0.5)		4.3		(4.1)		10.7
Interest expense		-		0.1		0.1		0.2
Income tax expense (recovery)		0.9		0.3		0.7		(1.2)
ADJUSTED EBITDA	$	18.4	$	15.3	$	37.2	$	34.9
ADJUSTED EBITDA as % of Sales		7.5%		6.4%		5.3%		5.0%

Forward-Looking Statements

All of the statements contained herein, other than statements of fact that are independently verifiable at the date hereof, are forward-looking statements. Such statements, based as they are on the current expectations of management, inherently involve numerous risks and uncertainties, known and unknown, many of which are beyond the Company's control.  Consequently, actual future results may differ materially from the anticipated results expressed in forward-looking statements, which reflect the Company's expectations only as of the date of this Press Announcement.  Forward-looking statements are based upon the Company's current estimates, beliefs and assumptions, which are based on management's perception of historical trends, current conditions and currently expected future developments, as well as other factors it believes are appropriate in the circumstances.  This Press Announcement, for the Company contains forward-looking statements about the Company's objectives, plans, goals, aspirations, strategies, financial condition, results of operations, cash flows, performance, prospects, opportunities and legal and regulatory matters. Specific forward-looking statements in this Press Announcement include, but are not limited to, statements with respect to the Company's anticipated future results and events, future liquidity, planned capital expenditures, amount of pension plan contributions, status and impact of systems implementation, the ability of the Company to successfully implement its strategic initiatives and cost reduction and productivity improvement initiatives as well as the impact of such initiatives.  These specific forward-looking statements are contained throughout the Company's MD&A including those listed in the "Operating and Financial Risk Management" section of the Company's MD&A. Forward-looking statements are typically identified by words such as "expect", "anticipate", "believe", "foresee", "could", "estimate", "goal", "intend", "plan", "seek", "strive", "will", "may" and "should" and similar expressions, as they relate to the Company and its management.

Numerous risks and uncertainties could cause the Company's actual results to differ materially from those expressed, implied or projected in the forward-looking statements.  Please refer to the "Forward-Looking Statements" section of the Company's Management Discussion & Analysis for the three and nine months ended October 29, 2016.

Other risks and uncertainties not presently known to the Company or that the Company presently believes are not material could also cause actual results or events to differ materially from those expressed in its forward-looking statements. Additional risks and uncertainties are discussed in the Company's materials filed with the Canadian securities regulatory authorities from time to time. The reader should not place undue reliance on any forward-looking statements included herein. These statements speak only as of the date made and the Company is under no obligation and disavows any intention to update or revise such statements as a result of any event, circumstances or otherwise, except to the extent required under applicable securities law.

The Company's complete financial statements including notes and Management's Discussion and Analysis for the three and nine months ended October 29, 2016 are available online at www.sedar.com.

Montreal, December 1, 2016

Jeremy H. Reitman
Chairman and Chief Executive Officer
Telephone: [phone]
Corporate Website: www.reitmanscanadalimited.com

REITMANS (CANADA) LIMITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF EARNINGS (Unaudited) (in thousands of Canadian dollars except per share amounts)
	For the three months ended				For the nine months ended
	October 29, 2016		October 31, 2015		October 29, 2016		October 31, 2015
Sales	$	245,604	$	240,270	$	703,538	$	694,999
Cost of goods sold	105,687		102,236		306,977		297,707
Gross profit	139,917		138,034		396,561		397,292
Selling and distribution expenses	122,730		123,927		357,627		367,985
Administrative expenses	10,663		11,110		32,434		33,791
Results from operating activities	6,524		2,997		6,500		(4,484)
Finance income	2,033		1,426		6,474		6,072
Finance costs	39		4,401		1,679		10,974
Earnings (loss) before income taxes	8,518		22		11,295		(9,386)
Income tax expense (recovery)	903		291		691		(1,224)
Net earnings (loss)	$	7,615	$	(269)	$	10,604	$	(8,162)
Earnings (loss) per share :
Basic	$	0.12	$	0.00	$	0.17	$	(0.13)
Diluted	0.12		0.00		0.17		(0.13)

REITMANS (CANADA) LIMITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (in thousands of Canadian dollars)
		For the three months ended						For the nine months ended
		October 29, 2016			October 31, 2015			October 29, 2016		October 31, 2015
Net earnings (loss)		$		7,615	$	(269)		$	10,604	$	(8,162)
Other comprehensive income (loss)
Items that are or may be reclassified subsequently to net earnings (loss):
	Cash flow hedges (net of tax of $2,599 for the three months and $2,340 for the nine months ended October 29, 2016; $2,228 for the three months and $905 for the nine months ended October 31, 2015)			7,103		(6,125)			(6,397)		(2,486)
	Foreign currency translation differences			(146)		-			113		(119)
Total other comprehensive income (loss)				6,957		(6,125)			(6,284)		(2,605)
Total comprehensive income (loss)		$		14,572	$	(6,394)		$	4,320	$	(10,767)

REITMANS (CANADA) LIMITED CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS (Unaudited) (in thousands of Canadian dollars)
			October 29, 2016		October 31, 2015		January 30, 2016
ASSETS
CURRENT ASSETS
	Cash and cash equivalents		$	101,794	$	97,192	$	118,595
	Marketable securities		49,270		50,597		45,189
	Trade and other receivables		6,048		5,107		4,103
	Derivative financial asset		3,267		6,439		14,405
	Income taxes recoverable		868		1,134		3,301
	Inventories		167,672		142,617		124,848
	Prepaid expenses		7,433		9,956		8,921
		Total Current Assets	336,352		313,042		319,362
NON-CURRENT ASSETS
	Property and equipment		126,602		138,128		134,363
	Intangible assets		23,363		23,575		24,347
	Goodwill		38,183		42,426		38,183
	Deferred income taxes		27,859		29,508		25,828
		Total Non-Current Assets	216,007		233,637		222,721
TOTAL ASSETS			$	552,359	$	546,679	$	542,083
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
	Trade and other payables		$	120,847	$	92,167	$	98,135
	Derivative financial liability		3,678		616		1,816
	Deferred revenue		12,705		11,277		19,325
	Current portion of long-term debt		1,988		1,867		1,896
		Total Current Liabilities	139,218		105,927		121,172
NON-CURRENT LIABILITIES
	Other payables		7,380		8,468		8,112
	Deferred lease credits		9,053		11,407		10,640
	Long-term debt		153		2,141		1,655
	Pension liability		20,005		22,355		19,336
		Total Non-Current Liabilities	36,591		44,371		39,743
SHAREHOLDERS' EQUITY
	Share capital		38,397		38,687		38,397
	Contributed surplus		9,570		8,809		9,007
	Retained earnings		328,473		346,189		327,370
	Accumulated other comprehensive income		110		2,696		6,394
		Total Shareholders' Equity	376,550		396,381		381,168
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY			$	552,359	$	546,679	$	542,083

REITMANS (CANADA) LIMITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited) (in thousands of Canadian dollars)
	Share Capital		Contributed Surplus		Retained Earnings		Accumulated Other Comprehensive Income		Total Shareholders' Equity
Balance as at January 31, 2016	$	38,397	$	9,007	$	327,370	$	6,394	$	381,168
Net earnings	-		-		10,604		-		10,604
Total other comprehensive loss	-		-		-		(6,284)		(6,284)
Total comprehensive loss for the period	-		-		10,604		(6,284)		$	4,320
Share-based compensation costs	-		563		-		-		563
Dividends	-		-		(9,501)		-		(9,501)
Total contributions by (distributions to) owners of the Company	-		563		(9,501)		-		(8,938)
Balance as at October 29, 2016	$	38,397	$	9,570	$	328,473	$	110	$	376,550
Balance as at February 1, 2015	$	39,227	$	8,014	$	368,581	$	5,301	$	421,123
Net loss	-		-		(8,162)		-		(8,162)
Total other comprehensive loss	-		-		-		(2,605)		(2,605)
Total comprehensive loss for the period	-		-		(8,162)		(2,605)		(10,767)
Cash consideration on exercise of share options	2		-		-		-		2
Cancellation of shares pursuant to share repurchase program	(542)		-		-		-		(542)
Share-based compensation costs	-		795		-		-		795
Dividends	-		-		(9,616)		-		(9,616)
Premium on repurchase of Class A non-voting shares	-		-		(4,614)		-		(4,614)
Total (distributions to) contributions by owners of the Company	(540)		795		(14,230)		-		(13,975)
Balance as at October 31, 2015	$	38,687	$	8,809	$	346,189	$	2,696	$	396,381

REITMANS (CANADA) LIMITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS (Unaudited) (in thousands of Canadian dollars)
		For the three months ended				For the nine months ended
		October 29, 2016		October 31, 2015		October 29, 2016		October 31, 2015
CASH FLOWS (USED IN) FROM OPERATING ACTIVITIES
Net earnings (loss)		$	7,615	$	(269)	$	10,604	$	(8,162)
Adjustments for:
	Depreciation, amortization and net impairment losses		11,235		11,593		32,302		35,699
	Share-based compensation costs		430		345		908		795
	Amortization of deferred lease credits		(805)		(1,189)		(2,373)		(3,623)
	Deferred lease credits		622		682		786		1,852
	Pension contribution		(501)		(485)		(1,160)		(1,188)
	Pension expense		609		525		1,829		1,575
	Realized loss on sale of marketable securities		-		-		-		15
	Net change in fair value of marketable securities		(498)		4,333		(4,081)		10,734
	Net change in fair value of derivatives		-		-		-		12,335
	Foreign exchange loss (gain)		1,510		(2,342)		4,184		(7,809)
	Interest and dividend income, net		(774)		(667)		(2,254)		(2,095)
	Interest paid		(39)		(68)		(139)		(225)
	Interest received		215		113		532		492
	Dividends received		633		636		1,825		1,884
	Income tax expense (recovery)		903		291		691		(1,224)
			21,155		13,498		43,654		41,055
Changes in:
	Trade and other receivables		(722)		(318)		(1,909)		(564)
	Inventories		(20,513)		(11,129)		(42,824)		(36,177)
	Prepaid expenses		1,214		(973)		1,488		2,192
	Trade and other payables		944		(3,677)		22,904		1,556
	Deferred revenue		(4,523)		(4,679)		(6,620)		(9,796)
Cash (used in) from operating activities			(2,445)		(7,278)		16,693		(1,734)
Income taxes received			2,119		1,859		2,489		1,861
Income taxes paid			(7)		(365)		(438)		(1,935)
Net cash flows (used in) from operating activities			(333)		(5,784)		18,744		(1,808)
CASH FLOWS USED IN INVESTING ACTIVITIES
Purchases of marketable securities			-		-		-		(5,660)
Proceeds on sale of marketable securities			-		-		-		1,678
Additions to property and equipment and intangible assets			(8,885)		(8,293)		(25,244)		(27,519)
Proceeds on disposal of property and equipment and intangibles			-		-		416		-
Cash flows used in investing activities			(8,885)		(8,293)		(24,828)		(31,501)
CASH FLOWS USED IN FINANCING ACTIVITIES
Dividends paid			(3,167)		(3,189)		(9,501)		(9,616)
Purchase of Class A non-voting shares for cancellation			-		(850)		-		(5,156)
Repayment of long-term debt			(477)		(447)		(1,410)		(1,323)
Proceeds from issuance of share capital			-		-		-		2
Cash flows used in financing activities			(3,644)		(4,486)		(10,911)		(16,093)
FOREIGN EXCHANGE GAIN ON CASH HELD IN FOREIGN CURRENCY			118		1,333		194		6,681
NET DECREASE IN CASH AND CASH EQUIVALENTS			(12,744)		(17,230)		(16,801)		(42,721)
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD			114,538		114,422		118,595		139,913
CASH AND CASH EQUIVALENTS, END OF THE PERIOD		$	101,794	$	97,192	$	101,794	$	97,192

SOURCE Reitmans (Canada) Limited

Jeremy H. Reitman, Chairman and Chief Executive Officer, Telephone: [phone], Corporate Website: www.reitmanscanadalimited.com